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Thursday evening, Lantronix (NASDAQ:LTRX) reported results for its second fiscal quarter ended December 31, 2012. Revenue came in at $12.2 million, a 16% increase over the year-ago quarter. Profit-wise, the company produced breakeven results for the fourth straight quarter, demonstrating strong fiscal discipline as management invests in R&D, sales, and marketing to reinvigorate the company's long-term prospects.

There has been notable progress since our last update. In particular, the xPrintServer family has been doing extremely well. As the population of Apple (NASDAQ:AAPL) devices increases, consumers and corporations are clearly turning to this product to print documents directly from iPhones, iPads, etc. Based on our estimated product breakdown (see below), we believe the xPrintServer family experienced close to 100% sequential growth in the December quarter. Continued strength in this product line should provide investors with confidence in the shares, which have hovered around $2 for several quarters.

Here's our complete set of quarterly highlights:

  • $12.2 million in sales, +16% y/y and +9% sequentially, primarily due to increased unit sales of new products (xPrintServer and SLP Console).
  • All regions experienced year over year growth. Several existing products rely on Europe and Data Centers. Both got hit in the September quarter, but rebounded a bit in December. However, LTRX credits this to its sales and marketing efforts, as opposed to a sustainable improvement in Europe and Data Centers build-outs. FYI, Data Centers may have simply been in delay mode. Many DC build-outs are driven by government, which were on hold until January 1st.

  • The autumn signing of Ingram (Europe) is proceeding well. The next step is for LTRX to sign Ingram's VARs, which should occur over the next 2-3 Qs, leading to a revenue ramp in the fall timeframe. This is in-line with the time line we originally envisioned.

Three new products were tied to the December quarter:

  • xDirect for networking machines. This fits into the External Device Enablement category, which exhibit semiconductor-like characteristics (12-18 month ramp times, but huge revenues with 6+ year life cycles).

  • vSLM, a virtualized software solution for integrating and managing IT equipment (this is an SLC enabler; don't expect this to produce meaningful revenue).

  • xPrint Server Office Edition, an Enterprise version of xPrint Server. This is an immediate contributor.

Possible new products in the March quarter:

  • A new xSenso offering?
  • A wireless version of xPico?
  • Stay tuned… and expect a big announcement in the next month.

Current Revenue Contributors (Sept/Dec 2012)

Product

% of Revs (Sept)

% of Revs (Dec)

Characteristics

Device Enablement (Embedded)

52%

46%

Semiconductor-like business; 12-24 month ramp time, but huge revenues with 6+ year life cycles.* A large Sept-Q production buy in Asia contributed to the sequential decline.

Device Enablement (External)

29%

29%

Requires 12-18 months to ramp; 5+ year life cycles.

Device Management (SLC)

12%**

13%

Improved following a down Sept Q. This is still a lumpy business, but LTRX sales & marketing is boosting sales in international markets.

Other Device Mgt (xPrintServer / SpiderDuo)

7%**

13%

xPrintServer is on fire; doing well and building channels/SpiderDuo requires data center build-outs to ramp up; it didn't get the same sales & marketing push as SLC, which was evident in its results.

* LTRX's most successful product ever took 12-18 months to ramp.

** Pipeline Data estimate

Future Revenue Producers (Dec 2012)

Product / Category

Time Needed to Ramp Revenue

Characteristics

xPrint Server Network Edition

Immediate

xPrint family can become 10%+ of company revenue.

xPrint Server Home Edition

Immediate

See above.

New xPrint Server products coming in FY13?

Immediate

Market Size = $100M+

SpiderDuo

Released 2 years ago… starting to ramp

Should become a solid contributor; lumpy, but trending the right way.

PremierWave EN

Has been building traction for over 12 months. Needs 6 more months to ramp.

Great potential, like its other embedded products. Will exhibit a long life cycle/Saw decent action last Q, but needs more 2-3 Qs; requires a longer sales process, but this was LTRX's big Asian win from Q3.

xSenso

Announced on July 31, 2012; Needs 9-12 more months to ramp

Connects sensors (i.e., temperature sensors) to networks; Part of a $1.5B opportunity/Needs to expand sales channels; LTRX is not a name brand in that area, so it will take several Qs to ramp up.

Device Enablement (xPico); Started sampling in Feb '12

Have been building traction for 6-months. Needs 12 more months to ramp

An equivalent current product = ~30% of revs. The new version will only create a small amount of cannibalism. They have design wins, but mostly prototype stage; needs 6-12 months to ramp.

Future External Device Enablement products

Will require 6-9 months to ramp

Same as above, but with slightly shorter life cycles

Wireless xPico (possible new product for 2013?)

Will require 18-months to ramp

Could be bigger than wired xPico (see above)

Source: Pipeline Data, LLC

Source: Lantronix: Holiday Quarter Exhibits Momentum